After much discussion over the last few years and pressure from the aviation industry, the Brazilian government announced in May its plans to privatise 3 of the country's largest airports, Guarulhos and Viracopos, both in Sao Paulo and Juscelino Kubitschek airport in the capital, Brasilia. Airports in Brazil are currently administered by state company Infraero and the plan is to transfer the management of these airports to the private sector. Should this process be successful then it may be rolled out to a further 62 airports.
The announcement comes at a time when the Brazilian aviation industry and Infraero, in particular, have faced increasing criticism. Overcrowding and delays are common and the accidents in 2006 and 2007 involving 2 of the country's largest airlines, GOL and TAM raised serious questions regarding safety. A survey carried out by IPEA (Institute of Applied Economic Research) stated that between 2003 and 2010 the total number of passengers flying in Brazil increased by 117% to 154 million per year and that this increase was not accompanied by the necessary investment in airport infrastructure, with a large number of airports operating beyond their capacities.
Another key driver for the privatisations (which are part of a government initiated US$2.5 billion airport improvement programme across 25 airports) is the need to allay concerns regarding the inability of the nation's transport infrastructure to cope with the massive influx of tourists for the 2014 World Cup and 2016 Olympics which Brazil is scheduled to hold. In view of Brazil's continental size, air travel is likely to shoulder the burden of this increased traffic. It is hoped, therefore, that the private sector will be able to make the necessary investments to upgrade the airports and increase their capacity as well as to operate them with greater efficiency and transparency.
Currently ANAC, Brazil's civil aviation regulatory body, is looking to receive proposals from private sector firms to carry out technical, environmental and viability studies which will help it decide on exactly which model to use for the privatisation. It is envisaged that the model could be by way of a government concession, PPP or administrative PPP. The RFPs were made available by ANAC on 25th July and interested parties have until 8th August to confirm their interest and then until 8th September to submit their proposals.
To access the RFP, which is in Portuguese, please click here
The next stage of the process will be to hold a public auction for the rights to operate these airports. The winning bidder will be required to pay up to 2.5% of the project value to those firms whose technical and viability studies are selected. It is expected that international companies will bid, either in competition or in partnership with leading Brazilian construction companies, such as Camargo Correa, Andrade Gutierrez and Odebrecht.
Whilst these plans are very positive for Brazil, there are already conflicting reports as to whether or not the airports will be ready in time for the 2014 World Cup and this process will need to progress quickly if Brazil is to use the World Cup and the Olympics as a launch pad for its new, improved transport infrastructure.
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
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The original publication date for this article was 03/08/2011.
