First Auctions of Lula 3 Government Have Few Interested Parties and Disappoint Expectations

High interest rates and problematic contracts from the past have diminished the attractiveness of concessions made in 2023

The first auctions of roads, ports, and airports in the current administration of Luiz Inácio Lula da Silva (PT) had a common characteristic: the low number of interested parties in bidding for the assets.

Most of the auctions had only two competitors, a weak number compared to Brazilian history and considered frustrating by the sector. A decade ago, tenders had almost a dozen interested parties.

Lot 2 of the highway concession in Paraná. ( Foto: Divulgação/Governo do Paraná ) - Divulgação

From January 2023 until now, the federal government has transferred seven infrastructure assets to the private sector. There were two batches of highways in Paraná, an airport in Rio Grande do Norte that underwent re-licitation, and four port terminals in the Northeast.

There was also an auction for a terminal in Porto Alegre scheduled for August, which was canceled due to a lack of proposals. As a result, the 2023 auctions had an average of 1.8 participants.

However, they argue that high interest rates and the specter of problematic concessions from other PT administrations help explain the current lack of interest from the private sector in the assets.

The Ministry of Transportation said it believes in an increase in competitors for the next auctions. The Ports and Airports department stated that "the success of an infrastructure auction is not necessarily determined by the number of participants in the bidding."

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