Global crisis and election limit interest in Congonhas privatization

The deterioration of the economic scenario at home and abroad and the political risk arising from the elections threaten the appetite of the main stakeholders for Congonhas (SP) airport, the jewel of the last round of airport concessions by the government of Jair Bolsonaro (PL).

So far, Switzerland’s Zurich and Germany’s Fraport have said that they can’t get into the game on their own. They did not say, however, if they plan to join in a consortium.

Technicians from the Ministry of Infrastructure who participate in recent conversations with these groups say that the Brazilian CCR, the Spanish Aena and the French Vinci remain firm and their representatives attended B3 last week for training on the auction procedures.

The dispute is scheduled to take place at B3 on August 18 and the government does not intend to reschedule it. The deadline for delivery of envelopes is August 15th.

“The government recognizes the difficulties involved due to the global macroeconomic scenario, but we are going to keep the auction because there is no other airport in the world at the moment with the relevance of Congonhas for the sector”, he told Sheet Ronei Glanzmann, secretary of aviation at the Ministry of Infrastructure.

“Investors we spoke to warn of uncertainties and difficulties, but everyone recognizes the importance of an airport like this.”

To take Congonhas, the winner will have to pay investments of almost R$ 6 billion, over 30 years (concession term), of which R$ 3.3 billion in Congonhas alone.

That’s because Congonhas leads a block with other airports: Campo Grande (MS), Corumbá (MS), Ponta Porã (MS), Santarém (PA), Marabá (PA), Carajás (PA), Altamira (PA), Uberlândia (MG ), Uberaba (MG) and Montes Claros (MG). It is not possible to acquire just one of them and the commitments are for the block.

The government did not expect new entrants to this dispute due to the political risk involved. In an election year, new groups even prospected the Brazilian market, but gave up in the face of uncertainties, even knowing that the contracts are long-term (30 years).

Former Infrastructure Minister Tarcísio de Freitas, a candidate for the government of São Paulo with Bolsonaro as his political godfather, tried to shield the event, bringing the process forward by a month. The idea was to avoid political contamination of infrastructure projects.

Since the coup-like demonstrations on September 7, encouraged by Bolsonaro, Tarcísio had been explaining himself to investors interested in disputing the concessions.

In the conversations, foreigners, especially those who still do not know the country where they intend to invest, are concerned not only with the change in government, but also with the change in the direction of infrastructure projects.

For this reason, Tarcísio began to put the maximum pressure on his team so that at least the auction of these airports could be successfully carried out. He has already been exploring the new concession of the NovaDutra highway (between São Paulo and Rio), whose auction took place at the end of last year, as a campaign speech.

Bolsonaro’s advisers take CCR’s victory in the auction for Congonhas for granted. For them, the group —which has already surprised by closing the NovaDutra highway— should also win with Congonhas.

​The seventh round underwent adaptations. Initially, the inclusion of Santos Dumont (RJ) was planned, but, after challenges from the government of Rio de Janeiro, Tarcísio, then Minister of Infrastructure, decided to leave him for a new round and grant him together with Galeão, also from Rio de Janeiro.

The postponement took place amid a discussion about the re-bidding of Galeão, arising from a return request made by the current concessionaire – Changi Airports, from Singapore.

The worsening of the economic scenario alienated possible interested parties. They are part of global groups that, abroad, face restrictions in the face of a recession scenario in Europe and the US, which should put pressure on interest rates – pillars of financing needed for infrastructure projects.

In Brazil, the situation is no different. The crisis and the expansion of expenses by the Bolsonaro government in search of reelection caused the fiscal situation to deteriorate, which helps to explain the perception of future risk (higher interest rates) for these groups that need loans. There are other uncertainties, such as the exchange rate — another potential risk factor for airport operations.

Uncertainties affect other disputes. In May, EcoRodovias alone won the Rio-Valadares road auction. In April, the government of São Paulo postponed the dispute for the concession of the North Rodoanel in the face of the economic crisis.

“We have a difficult year in the country, with explosive capital costs, and uncertainties in the macroeconomic scenario. At the same time, there is reputational damage caused by the Planalto”, says economist Claudio Frischtak, from Inter.B Consultoria.

“Very little is being done for the Amazon, a matter of the first order, and we still see the threat of a coup”, he adds.

The economist compares the Congonhas auction to that of the Presidente Dutra highway. The road concession, like the São Paulo airport, was also seen as a kind of crown jewel, but only attracted two competitors. On that occasion, CCR won the dispute with EcoRodovias.

“Those who don’t know the country are having a hard time understanding it right now,” says Frischtak.

In 2019, pre-coronavirus period, Congonhas received almost 22.3 million paid passengers, between departures and arrivals, according to Anac (National Civil Aviation Agency). In 2021, the number was 9.4 million. That is, it was 57.6% below the year before the pandemic.

In the view of analysts, the block’s strategy is to unite the so-called fillet with the bone. In other words, the design combined a busier airport (Congonhas) with smaller terminals that, if they were auctioned alone, might not generate investor appetite.

WHAT IS AT SAME IN THE 7TH AIRPORT AUCTION ROUND:

• North Block II: Belém International Airport – Val de Cans – Júlio Cezar Ribeiro -Belém/PA (SBBE) and Alberto Alcolumbre International Airport – Macapá/AP (SBMQ). The planned investments are R$ 874.77 million, estimating the jobs generated during the concession contract at 23,608 (direct, indirect and income-effect). The airports in this Block have economic vocations aimed at ecological tourism, business tourism, air taxi, cargo transport for export and as a support base for neighboring municipalities, contributing to regional and national integration.
• General Aviation Block RJ-SP: Campo de Marte Airport – São Paulo/SP (SBMT) and Jacarepaguá Airport – Roberto Marinho – Rio de Janeiro/RJ (SBJR). The planned investments are R$ 560.19 million. In the city of Rio de Janeiro, Jacarepaguá Airport is intended for general aviation. Campo de Marte Airport, located in the city of São Paulo, the largest business hub in Latin America, has a vocation for business travel.
• Block SP-MS-PA-MG: bringing together the airports of Congonhas Airport – São Paulo/SP (SBSP); Campo Grande Airport – Campo Grande/MS (SBCG); Corumbá Airport – Corumbá/MS (SBCR); Ponta Porã International Airport – Ponta Porã/MS (SBPP); Maestro Wilson Fonseca Airport – Santarém/PA (SBSN); João Corrêa da Rocha Airport – Marabá/PA (SBMA); Carajás Airport – Parauapebas/PA (SBCJ); Altamira Airport – Altamira/PA (SBHT); Airport Ten. Cell Aviator César Bombonato – Uberlândia/MG (SBUL), Mário Ribeiro Airport – Montes Claros/MG (SBMK) and Mario de Almeida Franco Airport – Uberaba/MG (SBUR).