"Brazil Auctions Rights to Airport"

Tuesday, August 23, 2011

Brazil Auctions Rights to Airport
By PAULO WINTERSTEIN and ROGERIO JELMAYER 
The Wall Street Journal


SAO PAULO—Brazil's government on Monday auctioned rights to the first major
airport to be operated by a private company as the country moves to pick up
the pace of investment in its air travel infrastructure ahead of the 2014
World Cup soccer tournament. 

A consortium called Infra-America competed against three other groups to win
the concession to build and operate new airport terminals near the
northeastern Brazilian city of Natal. The consortium has three years to
build the São Gonçalo do Amarante airport. It will then hold rights to
operate the airport for 25 years. The license can be extended once, for five
additional years. 

Infra-America beat out three other consortiums by offering a bid of 170
million Brazilian reais ($105.8 million). The bid was more than three times
higher than the reserve price set by the government of 51.7 million reais. 

Wagner Bittencourt, special adviser to Brazilian President Dilma Rousseff
for development of civil aviation, told reporters after the auction, "The
auction was clearly a success. This shows that the auction model is a good
one." 

Mr. Bittencourt said three more auctions were likely before the end of the
year and that the government would release details of the forthcoming
auctions in September. 

He added, "The government does not intend to get involved in these
investments. These investments are going to be a long-term, private sector
affair. The private sector must play a key role. Today's auction shows the
confidence that private investors have in development of Brazil's airports."


Infra-America is composed by Brazilian engineering contractor Engevix and
Argentine conglomerate Corporación América. Among other activities,
Corporación América operates airports in Argentina and other countries.
Engevix and Corporación América each holds a 50% share of Infra-America. 

Engevix representative José Antunes Sobrinho told reporters after the
auction, "Work will begin on the new airport immediately." He said the
consortium will seek investment loans from the government's Brazilian
Development Bank for about 70% of the initial construction cost. 

Martin Eurnekian, representative of Corporación América, said, "We intend to
build the most beautiful airport in Brazil, something to show the world at
the 2014 World Soccer Cup." 

Brazil's growing demand for air travel—which expanded 23% last year—has put
a strain on the country's airports. Ms. Rousseff agreed to hand over some
airports to private companies in order to expand capacity, especially ahead
of the 2014 World Cup and the 2016 Olympic Games, both to be held in the
country. 

Ms. Rousseff has said she will auction operating rights for another three
airports: Sao Paulo's international airport, as well as airports in Brasilia
and in Campinas, a city about 100 kilometers (60 miles) north of Sao Paulo.
The government also is studying licensing construction at airports in the
cities of Rio de Janeiro and Belo Horizonte. Sao Paulo, Rio de Janeiro and
Belo Horizonte, respectively, are Brazil's three biggest cities. 

By some estimates, Brazil needs to invest the equivalent of between $16
billion and $22 billion over the next 20 years in order to bring capacity in
line with future demand. Current capacity of 130 million passengers will
likely need to more than double, to 310 million during the next two decades,
to match air traffic demand growth of as much as 7% a year.

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