Brazil’s Failure to Auction Road Raises Concern Over Growth Plan

Brazil’s failure to attract bidders for one of two toll-road licenses to be auctioned this week is raising concerns that President Dilma Rousseff’s infrastructure plan won’t achieve its aim of igniting growth.

The BR-262 road, scheduled for auction on Sept. 18, drew no offers by last week’s deadline, according to land transportation regulator ANTT. The government had raised the rate of return on this and the BR-050 highway, which had eight bids, to 7.2% from 5.5%.

The main reason for the lack of offers to improve and operate the BR-262 was that probable legal moves by lawmakers in the state of Espirito Santo who oppose the toll-road may delay the start of the license, Transportation Minister Cesar Borges said in a Sept. 14 interview.

Rousseff’s administration is counting on infrastructure auctions to boost economic growth, Finance Minister Guido Mantega said Sept 13. The government plans to attract investments of 87 billion reais ($38.6 billion) through road and railroad auctions in the next five years,Borges said. The economy grew 0.9 percent in 2012 and 2.7 percent in 2011, the weakest two-year period of growth in more than a decade. The central bank forecasts the economy will expand 2.7% this year.

“I won’t say the plan will be unsuccessful, but the absence of bidders signals that the government’s options are limited and that the challenge is huge,” Andre Perfeito, chief economist at Gradual Investimentos, said in a Sept. 14 telephone interview from Rio Grande do Norte. “Brazil doesn’t know how to market itself.”

No Affect

The lack of bidders to improve and operate BR-262 “doesn’t affect the government’s expectations regarding growth and doesn’t affect, by any means, the government’s auction schedule,” Mantega said in a statement sent to Bloomberg Sept. 14.

The government’s sale of licenses including oil blocks, power plants, ports and airports, may reach “around half a trillion reais in investments in the next years,” Mantega told reporters on Sept. 13, adding that loans from private banks will be the main source of finance for infrastructure projects.

Bidders for the BR-050 highway included Triunfo Participaçoes e Investimentos SA, Arteris SA (ARTR3) and Ecorodovias Infraestrutura e Logistica SA.

Investors are suspicious about the government’s motives in selling state assets to private companies, according to Adriano Pires, head of the Brazilian Center for Infrastructure, said in a Sept. 14 interview.

“Today, investors see the plan to auction licenses as a matter of survival, as an economic need,” Pires said from Rio de Janeiro. “It won’t work unless they’re convinced that the government is completely on board with it.”

The government suspended planned auctions of two roads that were scheduled to be held in January, saying it needed to review traffic in the area.

To contact the reporter on this story: Maria Luiza Rabello in Brasilia Newsroom at mrabello@bloomberg.net

To contact the editor responsible for this story: Andre Soliani at asoliani@bloomberg.net

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