Brazil Heralds $1.2 Billion Raised in Four Airports Auction

Brazil raised 3.72 billion reais ($1.2 billion) with the auction of four airports on Thursday in the latest test of President Michel Temer’s strategy of jump-starting growth via private investments.

The auction, the first of its kind since 2013, had bids for all the airports. Fraport AG Frankfurt Airport Services Worldwide got contracts to operate the airports of Porto Alegre and Fortaleza, while Vinci SA and Flughafen Zuerich AG won contracts for Salvador and Florianopolis, respectively.

The tender fetched a 23 percent premium over the expected 3.01 billion-real minimum license fee, with the most intense disputes for the airports of Florianopolis and Porto Alegre in southern Brazil. Temer called the auction a success in a Twitter post. His comment was echoed by Transportation Minister Mauricio Quintella.

“The result of the auction shows that the country won back credibility,” Quintella told reporters in Sao Paulo, adding that “it opens the door for several other” infrastructure auctions. The government is currently studying which other airports can be auctioned to private operators and which ones will stay with state airport operator Infraero, eyeing an eventual initial public offering of the company, he said.

Brazil needs auctions like this to be a hit with investors as it tries to attract fresh capital and boost an economy that’s facing its deepest recession in at least a century. The government is also under pressure as the three-year corruption probe known as Carwash continues, with Brazil’s chief public prosecutor requesting investigations into at least five members of the cabinet, the heads of both houses of Congress and former presidents Luiz Inacio Lula da Silva and Dilma Rousseff, according to local media reports.

To attract foreign investors, the government changed some rules — winners must pay in advance 25 percent of the minimum price plus the premium and will be fully responsible for the investments, as Infraero won’t hold a stake in the airports. The total for the upfront payments had a 94 percent premium, meaning Brazil’s government will put R$ 1.46 billion in its pockets right away. The winners also committed to investing 6.6 billion reais in the airports.

“It wasn’t easy to make these auctions attractive in a moment when Brazil was discredited,” Brazil’s Presidency General Secretary Wellington Moreira Franco told reporters in Sao Paulo. He refused to comment on the fact that his name may be on the general prosecutor’s list, focusing instead on initial positive signs for the Brazilian economy, such as the drop in inflation.

  • The 3.72 billion reais…