Inflation and distant profit discourage highway investors

Soaring inflation, which makes construction inputs more expensive, and a distant prospect of profits threaten the holding of auctions for the state highways of Minas Gerais, São Paulo and Paraná scheduled for this year and which are trying to attract around R$ 55 billion in investments. over 30 years.

Faced with the uncertainties, Minas Gerais decided to postpone the competition for a new ring road to remove cargo traffic from the urban region. The auction was scheduled to take place in two weeks.

São Paulo, which also intends to bid for a ring road, still maintains the date for April 28, but is evaluating the possibility of postponement.

Road works in São Paulo and Minas should require investments of R$ 3 billion and R$ 5 billion, respectively.

On Wednesday (13), Rio Grande do Sul decided to take a risk and auctioned 270 km of roads. The Integrasul Consortium took the 271.5 km of the RS-122 and RS-240 highways, in the Caí valley, which are part of Block 3 of the Partnership Program of the Government of Rio Grande do Sul.

With the result, the government guaranteed R$ 3.4 billion in investments for 30 years. The operation served as a test for the other concession projects.

In Paraná, about 4,000 km of roads should be granted this year. These routes, however, were qualified within the federal government’s PPI (Investment Partnership Program). They alone should attract R$ 44 billion in investments, both for duplication and maintenance of the existing ones.

These roads were grouped into six blocks and, currently, the concession model is under analysis by the TCU (Union Court of Auditors). The auction is scheduled for the second half of this year.

According to consultants who advise groups of investors interested in the projects, there is a lot of uncertainty. The construction inflation already exceeds 30% against the 11.30% of the IPCA accumulated until April. The trend is upward in view of the increase in the price of asphalt (oil-derived) and steel.

In addition, high interest rates close the door to long-term credit for financing these investments.

Many of these groups prefer to concentrate investments in federal projects, which already have tolls built. The demand (traffic) studies carried out have already taken the billing plazas into account.

On state highways, these squares will have to be built. Also according to the consultants, interested parties will have to invest first to earn later, while on federal roads these groups are already starting to generate toll revenues.

Another downside is the auction model. Most projects provide discounts on tolls. The group that offers the biggest discount wins, which further reduces its future revenue margin.

Therefore, the federal government assesses that the state concessions program should not harm the auctions scheduled until the end of Jair Bolsonaro’s (PL) term.

In addition to the financial issue, there is also the political component to reduce new market entrants. The Bolsonaro government has brought a lot of regulatory confusion in the face of a rigging of agencies, according to consultants.

“As a result of this regulatory instability, we see few groups, especially foreigners, interested in these projects, even with the favorable exchange rate [dólar forte]”, says the partner of the Inter.B business consultancy, Claudio Frischtak.

These doubts make concessionaires already operating in the country expand their domains, consolidating their portfolio of projects in infrastructure and logistics.

At the end of last year, only two concessionaires competed in the NovaDutra auction, one of the main roads in the country that connects São Paulo and Rio de Janeiro. CCR, which had managed the highway since 1996, renewed its contract after winning the auction.