Jul 12, 2021

Concession for Brazilian Highway BR-163 Auctioned Last Week

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

After several starts and stops, the concession to operate 1,000 kilometers of Highway BR-163 in northern Brazil between the city of Sinop in northern Mato Grosso and the port city of Itaituba in the state of Para was auctioned off last Thursday to a company called Consorcio Via Brasil BR-163 which is a consortium of four companies - Conasa Infraestrutura, Zeta Infraestrutura, Construtora Rocha Cavalcante, and M4 Investimentos & Participacoes.

They were the only bidder and they offered toll rates that were 8.09% below the maximum allowed. The company already operates state toll roads within the state of Mato Grosso. That portion of Highway BR-163 will be converted to a toll road and privately administered. Highway BR-163 is considered probably the most important highway in Brazil for the movement of grain to Brazilian ports.

The concession to operate the highway is for ten years with an option for two additional years. This concession is shorter than the normal 25 to 35 years because the Ferrograo Railroad (Grain Railroad) between the same two cities is expected to be completed within ten years. Once the railroad is completed, the truck traffic is expected to decrease significantly. The total investment is estimated at R$ 3 billion with R$ 1.2 billion for operational costs and the rest for mandated highway improvements.

The National Land Transportation Agency (ANTT) requires the winning bidder to maintain the existing roadway while implementing a series of required improvements. For starters, the company will be required to build three toll plazas. Within the first five years of operation, the company will be required to add 42.87 kilometers of passing lanes, 30.24 kilometers of service roads, 340 kilometers of highway shoulders, 8 new intersections, 7 pedestrian overpasses, and access to the Port of Miritituba.

The portion just auctioned off carries approximately 15 million tons of grain annually and farmers are concerned the tolls will offset any lower freight rates achieved by an improved highway. When the paving of BR-163 was completed two years ago, freight rated declined 26%.