Brazil inaugurates new regime of port authority privatisation

Marcos Ludwig

Veirano Advogados, Rio de Janeiro

marcos.ludwig@veirano.com.br

Brazil has had a dual regime of port facilities since the early 1990s. On the one hand, there are public-use port facilities located within public ports (portos organizados). Each public port is subject to the jurisdiction of a – until now – state-owned port authority, typically named ‘companhias docas’ (dock companies). The operation of specific port facilities is auctioned to the private sector under a regime of lease (arrendamento), the Brazilian version of the ‘landlord model’ that is widely practised across the globe. Since the entering into force of Law No 12,815/2013 (the ‘Ports Law’), auctioning port facilities within public ports in Brazil has been the duty of the Brazilian government, except in special cases in which the role is delegated to the port authorities under certain conditions.

On the other hand, there are private-use port facilities located outside public ports that are therefore not subject to the jurisdiction of a port authority. The construction and operation of these facilities is a matter for the private sector, which must invest at its own risk subject to securing an authorisation (autorização) from the Brazilian government. There are currently 203 of these facilities, which are typically known as ‘terminais de uso privado’ or simply TUPs. Of this total, 56 are members of the Association of Private Port Terminals (ATP), created in 2013, and together account for more than 60 per cent of the total volume of cargo port handling in Brazil.

Under this dual regime of port facilities, the private sector has been playing an increasingly relevant role in the port sector in Brazil during the past three decades, subject to the regulation and oversight of the National Agency of Waterway Transportation (ANTAQ) pursuant to Law No 10,233/2001. What is new is allowing the private sector not only to develop private-use port facilities at its own risk (regime of authorisation) and to bid in government auctions for public-use port facilities within public ports (regime of lease), but also – for the first time ever in Brazil – to play the role of port authority and, therefore, manage public ports in lieu of state-owned enterprises under a regime of concession (concessão) that had been contemplated in the Ports Law, but not yet put into practice until now.

The implementation of the new regime is expected to raise a few challenges for  concession holders. In the case of the concession of the management of the ports of Vitória and Barra do Riacho after the privatisation of Codesa, for instance, the concession holder will have 180 days to conclude negotiation with the various private sector companies that have been operating public-use port facilities within each of the two ports with a view to agreeing on mutually reasonable terms for the conversion of the existing lease agreements to new, private law governed agreements. Legal risks cannot be discarded as the various parties seek to adapt to the new regime and feel the practical impact of the transition.

As the next steps, the Brazilian government expects to have the concession contract for the ports of Vitória and Barra do Riacho signed with Quadra Capital within the second quarter of 2022. It also expects to auction the concession of the management of the following other public ports: (1) port of Santos in the state of São Paulo (busiest port in South America); (2) port of São Sebastião, also in São Paulo; (3) port of Itajaí, in the state of Santa Catarina (second busiest port in Brazil in container handling and first in export of frozen cargo); and (4) ports of Salvador, Aratu-Candeias and Ilhéus in the state of Bahia. The government’s intention is to auction both the Santos and São Sebastião ports before the end of the year, but the prevailing opinion in the market seems to be that this goal will be difficult to achieve, especially considering the general elections that will take place in Brazil in October 2022 both at the federal and state levels.