In light of the ongoing push for increased efficiency throughout the Brazilian port sector, MTBS has assisted the Government of Brazil to optimise its Port Privatisation Program, through an assignment commissioned by the Global Infrastructure Hub. This was done by hosting a structured dialogue between the public- and private sector prior to the envisaged concessioning of four port authorities: CODESA (port authority for Espirito Santo), Santos Port Authority, Organized Ports of São Sebastião and Itajaí.
This early market consultation provides the public authority with an opportunity to cross-check its thinking with that of private sector specialists, including contractors, lenders, and equity investors. It is a mechanism for the private sector to deliver feedback on how the packaging and scope of the program could be developed to maximise private sector participation and improve competition. This process will ultimately benefit the public through increased government revenue and long-term productivity gains with regards to port operations.
The key findings of the market sounding can be broken down into four key areas:
Brazilian Market & Macro-Economic Setting – Assess sentiment regarding Brazil as a market for investments, use of mechanisms to hedge exchange rate fluctuations and inflation and general market appetite towards investments in the port sector.
Commercial & Financial Project Context – Evaluate sentiment about the use of variable fees to hedge volume, exchange and inflation risks, and the currency of port Master Plans.
Contractual & Institutional Setting – Investigate private sector sentiment about having the government as contractual counterparty in lease agreements, which types of bidders will be eligible for each port privatisation and intra-port versus inter-port level playing field.
Procedural Analysis into the concessioning procedure and level of dialogue with the government in concession arrangements along with the role of technical, operational and investment plans as potential selection criteria.
The market sounding involved close collaboration with various public entities within Brazil, including the Special Secretariat of the Investment Partnerships Program and the National Secretariat of Waterways and Ports. The National Development Bank (BNDES) was also on board throughout the process as it will be the implementation agency who is tasked with structuring the privatisation program.
For further information regarding the added value of market soundings and its benefit for the port privatisation process, please refer to the published article written in coorporation with the Global Infrastructure Hub.