Spotlight: The impacts expected if Brazil’s infrastructure minister resigns
Brazilian infrastructure ministry Tarcísio Gomes de Freitas (pictured) is expected to announce his resignation in the coming days, at a time when the government’s agenda of infrastructure concessions is facing various difficulties.
Freitas, who has been minister since January 2019, is reportedly planning to stand as a candidate for the governorship of São Paulo state in the October elections. Under electoral rules, any candidates standing for election, other than the president, are obliged to quit their public posts by April 2 in order to be eligible.
The expected departure of Freitas would be bad timing for the government, since infrastructure concessions in Brazil, generally considered a success under Freitas’ leadership, have run into some headwinds lately.
“The departure of the infrastructure minister is expected, but what’s really already having an impact on [investor] sentiment regarding the progress of the infrastructure agenda is the war between Russia and Ukraine. The increase in fuel prices generated by the war has a direct impact on infrastructure assets linked to transport, such as airports, highways and ports,” Paulo Dantas, an infrastructure and project finance specialist at law firm Castro Barros Advogados, told BNamericas.
Despite the fact that the infrastructure concession projects planned for this year have already been structured and the infrastructure ministry has considerable technical capabilities, the imminent departure of the minister is yet another difficulty in an already turbulent scenario.
This year, the government has faced various challenges to push on with its concessions agenda. The administration’s original aim was to try and hold as many auctions as possible during the first half of the year to avoid expected turmoil caused by the electoral process in October.
However, this plan has now been undermined as the appeal of long-term assets to international and domestic investors has rapidly deteriorated because of the uncertainties generated by the war in Eastern Europe, particularly due to the upward pressure it is causing on prices of inputs.
“I think the big problem is not the changes within the ministry, but the international situation,” said Dantas.
The favorite to replace Freitas is the current deputy infrastructure minister, Marcelo Sampaio, government sources told BNamericas on condition of anonymity.
RECENT SIGNS OF SETBACKS
In February, the government suspended the planned auction for a concession for the BR-381/BR-262 highway, which was expected to generate 7bn reais (US$1.4bn) in investments during the 30-year contract term.
“One of the main reasons for this suspension of the auction is that road concessionaires are currently suffering enormous cost pressures and these risks of increased costs need to be well detailed in the public notice for all concessions,” Marco Aurélio Barcelos, president of highway concessionaires association ABCR, told BNamericas.
The auction was originally scheduled to take place on February 25 and no new timetable has yet been established, although the government insists that it will hold the auction this year.
More recently, the authorities postponed the planned auction for a concession involving projected investments of 1.5bn reais to expand irrigation areas in Bahia state.
The auction for the Baixio de Irecê area, which involves a 35-year concession, was originally expected to take place on March 15, but has now been pushed back to June 1.
The government claimed that, due to the originality and complexity of the project, several of the companies interested have requested additional time to study the documents and formulate their proposals.
Meanwhile, if the pressure on fuel prices persists, analyst fears that the round of airport concessions, planned to be held in the first half of the year, could be postponed, since the airline sector is very sensitive to rising fuel costs.