Brazil’s São Paulo State Resumes Infrastructure Bids Worth $1.3 Billion

By Thomaz Favaro

The Brazilian state of São Paulo, the industrial engine of the country and home to 22% of its population, last month announced the resumption of public auctions in the infrastructure sector, which had been suspended since early 2020 due to the COVID-19 pandemic. The government estimates that the concessions will attract $1.3 billion in investment.

Investors and operators in the infrastructure sector are likely to benefit from predictable auction schedules and a largely pro-business stance by the local government in the short to medium term.

Six public auctions are set to resume, likely taking place during the first half of 2021. The largest projects include the concession of coastal highways (valued at $556 million) and of two commuter rail lines ($467 million). The state administration has said that the public notices should be published by the end of this year.

Positive prospects

Both state and federal governments have prioritized infrastructure projects in recent years, as there has been broad political consensus over the need to improve the country’s operational environment with the support of the private sector. This has remained true through President Jair Bolsonaro’s administration, which has continued to prioritize the concession of large projects like ports and airports. Because this agenda does not significantly depend on legislative approval, it has advanced at a moderate pace (despite any of Bolsonaro’s governability challenges).

State governments have also worked to attract private investment for infrastructure development. Businesses operating in São Paulo state—which alone has a GDP larger than that of Argentina—have enjoyed an overall pro-business stance over consecutive administrations that is likely continue over the next two years.

Moreover, given that the local government is faring better than its federal counterpart when it comes to governance, the state is able to implement its concessions agenda at a much faster pace. Back in May, the São Paulo administration announced the largest highway concession contract ever signed in Brazil; a 30-year project – worth $2.5 billion – that encompasses 791 miles of road.

The outlook for global businesses

Despite the many uncertainties stemming from the pandemic, the São Paulo state government is likely be successful in expanding its infrastructure through private sector bids over the next two years. A predictable calendar of concessions, as well as consolidated proceedings regarding the auctions, will play an important part in securing the participation of private investors.

In the long term, companies operating in the state will be able to do so more efficiently and with less risk thanks to continuing infrastructure development.

Thomaz Favaro is a Director and lead analyst for Brazil & the Southern Cone at Control Risks, based in São Paulo. Helena Ceneviva contributed to this piece.